Pension Fund Plan Under Fire

March 21, 1988|By Cheryl Devall.

Unauthorized city payments to four union pension funds would be halted under an ordinance to be introduced Monday to the Chicago City Council Budget Committee.

More than $83 million diverted from working employees` benefit funds since 1980 have been used to help defray health insurance costs for 16,000 retired city employees, Corporation Counsel Judson Miner, who helped craft the ordinance, said Sunday.

According to Miner, most of the city`s payments have been illegal because the council did not approve them and because state law mandates that the pension funds assume full responsibility for retirees` health benefits. Continuing the payments this year would cost Chicago taxpayers $22 million above the current city budget and would make necessary a property tax increase for that amount next year, he said.

The ordinance, Miner said, would continue those payments for three more months provided that the city propose a new agreement with the boards within 30 days after the law`s enactment; that the union pension boards help lobby in Springfield for legislation required to change the city`s arrangement with the boards; and that the pension boards completely reimburse the city for its support of the benefit pool. Until the reimbursement is complete, the city would enact a real estate tax to make up the loss, Miner said.

City Comptroller Ronald Picur suggested beneficiaries of the union funds pay higher insurance premiums and that the funds, with assets exceeding $3 billion, make larger contributions to the benefit pool.

``Despite their protests to the contrary, the pension funds can afford to fulfill their legal responsibility if they are managed responsibly,`` Picur said.

The pension fund boards were not consulted about the proposed ordinance, Picur said. Pension fund representatives could not be contacted for comment Sunday.

State law requires the city to pay into the benefit fund, and $15 million was budgeted for the current fiscal year, Picur said. The dispute, he and Miner said, arises over an increasing amount of unauthorized money the city has paid in addition to that required by the state.

The city discovered last year that it had been making unauthorized health insurance payments since Mayor Jane Byrne`s administration, Miner said. Pension fund representatives told state lawmakers that they could provide health benefits without cost to the taxpayers, and for some years they were able to do so. But in 1980 the city offered $2 million to help the funds meet their payments, and by last year the city had paid a total of $83 million, Miner said. ``It always was illegal, but neither the corporation counsel nor the comptroller knew it was going on,`` he said.

Last October the city sued the boards of the police, firefighters, laborers and municipal employees pension funds to force them to assume full payments.

Miner said the city had offered to settle the suit by including the boards` beneficiaries in its employee health insurance plan. But the sudden death of Mayor Harold Washington last November and the changed political climate in the City Council since then have hampered discussion of that option, he said.

The council last considered the pensions in January, when it voted to extend health benefit payments until April 1 in response to letters from worried pensioners and arguments from Ald. Michael Sheahan (19th) that the retired employees would be left without health insurance.

But their fears are misplaced because the pension funds can afford to pay for health coverage, Picur said. Benefits for spouses and children of city employees killed on duty are covered by a separate fund and would not be affected by the ordinance, he said.

He and Miner said that they are trying to line up aldermen from across the political spectrum to support the ordinance. They said they expect no decision Monday from the Budget Committee.

Many aldermen, they said, are unaware that the health benefits have been paid out of the city`s till.

So far, the city has paid an unbudgeted $6 million this year in retirees` health benefits, Picur said, adding, ``The city has not been Scrooge by any means.

``This is not the city versus the annuitants (pensioners),`` he said.

``This is the taxpayers versus the pension funds. The annuitants are caught in the middle.``

However, he said, ``They realize they`ve had virtually a free ride since 1982.``

Picur said that police and fire retirees have paid no health insurance premiums since 1982 and that the other pensioners` contributions have remained at $26 per month since then. The average monthly pension for beneficiaries of the four funds is $1,250, he said.

The Illinois General Assembly must approve any changes in benefits offered by pension funds, including changes in the upper limit of their contributions to those benefits. Miner said the city will urge the state legislature to raise the cap on those contributions, which is $55 a year for each beneficiary.